Euro hold steady even though inflation fell

By Ricky BeanApril 1st, 2014

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Yesterday was a mixed day for the euro as better-than-expected data during the morning – in the form of positive growth figures from the German Retail Sector – buoyed the performance of the single currency and caused it to strengthen against both sterling and the US dollar.

Gains in rates were tempered, however, by the flash inflation estimate from the Eurozone, which put inflation in the eighteen-nation bloc at 0.5%. 0.1% off an expected 0.6%. Rates of inflation have an effect on euro rates as they are, generally speaking, positively correlated with central bank interest rates. There was, however, consolation in the fact that core inflation stayed relatively unchanged as the market did not seem to perceive the lower-than-expected inflation level as strong enough to push the European Central Bank (ECB) towards more monetary easing. Thus, the euro traded in a relatively small range throughout the day.

Today, manufacturing data from Southern Europe may influence the performance of the single currency, as may unemployment figures from Germany.

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